Amaero International Ltd: Better than Expected Q4 Result, Projects Progressing to Plan
Amaero International Ltd
Better than expected Q4 result, projects progressing to plan
Amaero International Ltd (ASX:3DA) is a global specialist in metal additive manufacturing for the defence, aerospace and tooling sectors. The company has announced a better than forecast operating cash loss for Q4 FY21 of $0.97m, bringing the total operating cash loss for the year to $4.87m. Our forecast was for a $5.14m operating cash loss for FY20. Amaero ended the quarter, and year, with net cash of $11.5m. Amaero also highlighted the progress it had made in the quarter and subsequent, with a draft Heads of Agreement for the proposed 3D printing centre in the Middle East now submitted and signing and contract negotiations expected by the 1st half of FY22; with the delivery of evaluation parts to Boeing from the December 2020 purchase order; with the successful build of the production version of the tool for the Fletchers Glass agreement; and with the announcement post quarter end to build an $8m, 120tpa customised and proprietary titanium alloy powder manufacturing plant in Victoria. Our base case valuation of $0.93/share reflects the rollout of the 120tpa titanium alloy powder manufacturing facility and the initial tooling on the Fletcher Glass agreement but not the upside from a global rollout of the tool nor the development of the ME 3D printing centre or the expanded opportunity for a substantially larger titanium alloy powder manufacturing plant. As we have previously outlined in our 1 February initiation report, Delivering efficiencies in 3D printing, successful development of all these projects derives a collective valuation of $5.72/share.
Business model
Amaero generates revenue from several sources including the design and prototyping of additive manufacturing solutions on a cost-plus basis; from contract manufacturing and tooling on a price per unit basis; from the sale of proprietary metal 3D printers & equipment and 3D printing metal powders on a cost plus mark-up basis; from post-sales support and maintenance service fees; and from the rights to commercialise patented proprietary alloys developed by Monash University on a price per unit basis. Amaero has the North American commercialisation rights to a range of 3D printing machines, including the world’s largest laser powder bed machine, as well as the powder preparation machines and powder handling and recovery devices. The company owns fully accredited manufacturing facilities in Melbourne, Adelaide and El Segundo, California.
A busy quarter with good progress towards commercialisation
Amaero made substantial progress across its four flagship projects in Q4 FY21 with the successful build of a production version of the Fletcher Glass tool, together with a 30% performance improvement in the alloy used in its manufacture, positioning this project to progress rapidly towards commercialisation in FY22. This together with the draft HoA for the Middle East 3D printing centre and the board sign-off for the development of a 120tpa titanium alloy powder plant in Melbourne, put the company on track to generate early revenues from one or more of these projects in FY22 with more significant revenue generation expected in FY23. The titanium alloy powder facility will generate annual revenues of ~$30m once fully operational and we have this in our forecasts from FY23, with small contributions from the plant in our FY22 forecasts as it is tested and commissioned. The company also highlighted it had 35+ projects in the pipeline, some of which could come to commercialisation in FY22.
Base case DCF valuation is $0.93/share ($190m)
Our base case DCF valuation of $0.93/share includes forecasts for the 120tpa titanium powder facility as well as existing contracts with Fletchers and a US defence & aerospace manufacturer. Successful commercialisation of these projects delivers considerable upside to our valuation. As we have previously highlighted this could take our valuation to $1.15b.
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- Amaero International Ltd: Better than Expected Q4 Result, Projects Progressing to Plan28 Jul 2021